The Sword of Damocles hangs over Cyprus

Patrick Henningsen is a writer, investigative journalist, and filmmaker and founder of the news website 21stCentury Wire.com. He has appeared on RT news and has also written for the Guardian.co.uk, GlobalResearch.ca, and Infowars.com. He is currently investigating issues on location in the Middle East and in Southern Europe. Patrick is a graduate of California State University at San Luis Obispo.

While bureaucrats and technocrats in Nicosia have been busy trying agree on an even more horrible haircut than each of the previous Troika proposals, the EU’s deadly pathogen has begun to spread to the far corners of the country.

Among others, it hit the southern seaside tourist town of
Paphos.

Cyprus managed to avoid the initial danger of an all out bank
run and the potential for mass rioting this week, which is probably
down to the fact that no Cypriot wants to see their country become
a lawless banana republic in the Mediterranean.

But that calm will not last for long if banking oligarchs
continue to pressurize this economy.

Capital controls and frozen bank deposits mean thousands of
businesses are now being strangled of operating funds. It’s a very
bad scene. One successful Pathos bar owner, named Nicolas, is being
hit particularly hard, and told us that his story is the same as
every local trader he knows.

He explained, “Our credit card merchant account was with Laiki
Bank and we cannot access it anymore, so we cannot take cards.
People aren’t spending money. All my suppliers are demanding cash
for deliveries, and we just haven’t got enough. They’ve got our
cheques in the bank but we don’t have the funds to cover them.
Staff need to be paid in cash daily now. My emergency funds are
frozen in another bank account and cannot be accessed for 45 days.
On top of that, tourism is down, and there’s no foreign money
coming in anymore. We’ll be lucky if we’re still here in 4 or 6
months time.

“The only thing which might remedy the situation is if the
government impose austerity cuts on government spending”.

In other words, things are likely to get much worse, as the
Sword of Damocles is now hanging over the head of every
Cypriot.

The story of Damocles is rather poignant in
more ways than one. The Damocles fable can be applied two ways
here. Everyone we spoke to here on Cyprus is aware that this sword
is hanging over them, suspended by threads. That is obvious to the
thousands of small to medium size businesses who are all hanging in
there, and barely holding on in the face of capital controls and an
acute liquidity shortage. If they didn’t have sufficient cash
reserves before this crisis hit, then it’s doubtful that they will
be able to weather the storm indefinitely.

The deeper aspect of Damocles here, is that before joining the
EU and opting into the euro single currency, Cyprus was a closed
economy and could more easily manage its domestic and incoming
cash. It’s currency, the Cypriot Pound, was one of the strongest in
the world. It filled a gap in the international market by offering
a secure and profitable offshore destination for capital
investment. Why worry when everyone seemed to be doing well? Then
came the Russian money, and then the housing bubble, and the euro –
which turned this small island of 800,000 into a speculative
free-for-all, where incoming cheap money corrupted nearly every
level of Cypriot society. This period of speculative gambling based
in Nicosia was transposed on top of an already existing, pre-euro
layer of backhanders and fat brown envelopes.

It was a perfect storm for our Damocles. All the while, shrewd
shylocks in New York, London, Berlin and their court administrators
in Brussels, where watching closely, and simply waiting for someone
to spring the trap. Arguably, that someone was a Dubai-backed,
high-flying Greek tycoon, Andreas Vgenopoulos, who took control of
Cyprus’s Laiki Bank and proceeded to attach the Cyprus banks to a
sinking Greek financial system.

You can blame Vgenopoulos, or Laiki management, or you can blame
the money laundering, or the Troika. You can even blame the corrupt
politicians, but in the end, all anyone could do in the end is
stand and watch its balance sheet go up in flames. and watch it
sink to the bottom. Corruption in Nicosia left the Troika mafia in
control of the entire country of Cyprus. Like Damocles, some older
Cypriots are now longing for their old farming lives, where living
off the land was part and parcel of living here.

As is always the case these days, the elite financial wars and
ponzi schemes end in disaster for the average saver, and even worse
for the above average saver. The people are asked to pay for the
collective losses of the elite.

A local restaurant owner in Larnaca, Mr Petreu, told us a story
which made my heart sink, and one which illustrates the Greek
tragedy unfolding before our eyes here. His business is already
being ravaged by an EU funded motorway project which is running
along the beach front and will cut off most of his trade as a
result. Contractors are moving at a snails pace and is expected to
take two years to complete. Eurocrats and the firms profiting from
the work have offered no compensation, and some suspect that this
EU road works project was lobbied for in Brussels and done by
design, in order to crush already struggling long-term resident
businesses, in order to redevelop the area with modern multimillion
dollar properties and casinos in Larnaca in a bid to attract Gulf
state billions and wealthy Northern European money there. Now the
banking crisis has hit as a left-hook, knockout punch.

He explains, “For 29 years, I have always paid my rent on
time, but this week I had to call my landlord to tell her to reduce
my rent or I cannot afford to pay it. So I gave her that choice –
reduce the rent or take me to court because either way, I can no
longer afford it.”

The next call could be to his daughter at university, saying he
cannot afford to help finance her higher education any
longer.

These are the stories which people like Christine Lagarde and
Angela Merkel will never hear, even though they have the power to
rectify the situation. If you still think they really care, then
you are probably still in denial.

Agent provocateur

Now that the danger of an immediate run on the banks has
subsided, former President Demetris Christofias has become one such
focus of the people’s anger.

Lucious Petrou, a retired local farmer says, ”Imagine the
timing of Christofias resigning only five weeks ago, and then our
banks closing their doors three weeks later?”

“Our Communist President came into power with a 1 billion
euro surplus and left with what will be a 17.5 billion euro debt to
the international bankers. Where is he now?”

Most residents are confident that Christofias will be dragged
into the dock during the upcoming judicial inquiry into the banking
collapse.

Of course, that’s the big question on everyone’s minds: why
Cyprus? Why now? Social Democrat and avowed communist Demetris
Christofias came to power in 2008 through a coalition government,
after campaigning on the populist platform of the “reunification
of Cyprus”, bringing the Greek and Turkish sides together in a
bi-zonal federal state. The people liked the idea, but instead they
got an economic meltdown.

Other shadowy players in this story mentioned in the cafes of
Nicosia include the USA, who with the help of Henry Kissinger, were
the architects of the Turkish invasion in 1974 and masters of the
IMF today. Like the British, the US also have a military presence
on the island to go with their 300 plus other bases and
installations scattered throughout Turkey. Many Cypriots believe
that the US have been using their multi-lateral institutions like
the IMF to kick Russian influence – and money out of Cyprus, and
thus, out of Europe. There are an estimated 50,000 Russians living
in Cyprus, concentrated around the city of Limassol, along with
many off-shore corporations, and hundreds of thousands more coming
to visit year-round. If the US, or the EU wanted to lean on Russia
– particularly in Syria, then this would be the first place to
start.

We also discovered that there are an estimated 20,000 plus
Chinese who have established a burgeoning European beachhead in and
around Pathos, and one would expect that there were at least a few
hundred Chinese millionaires, or billionaires, who took a sizable
haircut too this week – but you won’t find that one in the
mainstream media.

One other name kept coming up again, and again, as we combed the
back streets of the old town in Nicosia. His name is Andreas
Vgenopoulos, the Greek tycoon and chairman of the controversial
Marfin Investment Group, and the man who inflated the now failed
Laiki Bank’s financial balloon – which was doomed to pop three
weeks ago, taking the whole of the Cyprus economy down with
it.

The story behind his inflated success and failure is a bizarre
Ménage à trois between Dubai, Athens and Nicosia. It appears that
Mr Vgenopoulos steered a massive ponzi scheme which attracted the
usual suspect crowd of high-flying financiers, naive and corrupt
politicians and overpaid government bureaucrats, who flocked to his
over-cooked honey pot of accessible capital backed by the same junk
bonds and overvalued paper which brought down Cyprus’s EU neighbor
Greece only 2 years earlier. By the time Cypriots knew what was
going on, the bottom had already fallen out of their balance sheet
– forcing Nicosia to go cap in hand to the ECB, and later to the
IMF.

Vgenopoulos, it seems, was the Troika’s agent provocateur in
this story – he lit the match, left the building with all the loot
and watch it burn from across the sea.

Last but not least, people seemed very suspect, and somewhat
offended, by the Germans, who magically opened-up their bond
market, promoting investment into everything from solar energy to
“secure investment” – at the very same time the Cyprus economy was
flushed down the Euro- toilet by the Troika.

What’s worse, however, is that the elite Troika (Brussels,
Berlin and the IMF) had known about this contagion and also that
Cyprus would collapse well in advance of this month’s bank holiday
– but they just stood back and watched as the moussaka to hit the
fan, to swoop in with more crisis loans which has ultimately given
them complete financial control over the economic destiny of the
island. It’s like the heroin dealer trying to help a recovering
addict by giving them a kilo of smack. What will happen if the
European and Cyprus banks re-hypothecate all this new debt-based
issued money from the Troika? And what about the bankers’ using
these latest loans to parlay a piece of Cyprus’s untapped gas and
oil reserves? We’ll find out in a year, until then, it’s watch and
wait.

Even worse, imagine the heroin dealer, after giving the
recovering addict a final kilo smack, proceeds to steal the
addict’s furniture, sell-off his house and cut the wages and
pensions of everyone living in the house.

One winner so far, is the private security company G4S, who have
been contracted to provide extra guards throughout Cyprus in case
the people lose their patience with the government and their Troika
masters in Europe. It’s been a relatively easy gig for them so far
in Cyprus. If it happened anywhere else, there would have been
riots in the streets. If the Troika tries to steal depositor’s
money in Spain, G4S probably won’t cut it, and the Spanish
government would probably give the security contract to someone
like Blackwater - as was done already in Greece.

When the dust settles, it doesn’t take a genius to figure out
that every Cypriot will know who robbed them, and how it was done.
Now, in their deceptive laid back fashion it seems, the people are
deciding how best to even the score.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.